STER (version 3.0) Solicitor's title and exchange requirements | Practical Law

STER (version 3.0) Solicitor's title and exchange requirements | Practical Law

Use of this document is free, subject to the Conditions in GN/CPSE (version 3.3).

STER (version 3.0) Solicitor's title and exchange requirements

Practical Law UK Standard Document 0-501-8877 (Approx. 10 pages)

STER (version 3.0) Solicitor's title and exchange requirements

Law stated as at 02 Jun 2010England, UK, Wales
Use of this document is free, subject to the Conditions in GN/CPSE (version 3.3).
This document is part of the Commercial Property Standard Enquiries (CPSE) suite of documents, prepared by members of the London Property Support Lawyers Group and endorsed by the British Property Federation.
For more information about the CPSE see GN/CPSE (version 3.3).
This document is available in three formats:
  • The web format incorporates guidance notes, which can be viewed or printed with, or separately from, the requirements (see Actions pane in the top right hand corner of the screen).
  • The Word format can be accessed from the Word link in the Actions pane in the top right hand corner of the screen. The Word format allows a user to insert replies to the requirements.
  • The PDF format can be accessed from the link below.
If you have any comments, please e-mail [email protected].
For details of changes made between this document and its previous version, see Legal update, June 2010: new versions of the CPSE documents released.
For the PDF version of this document click here.
For the Word version of this document click here.
2.5.2017 - We are in the process of amending this document to reflect the Standard Commercial Property Conditions (Third Edition).
Commercial Property Standard Enquiries
STER (version 3.0) Solicitor's title and exchange requirements
Conditions
This document may be used free of charge subject to the Conditions set out in GN/CPSE (version 3.3) Guidance notes on the Commercial Property Standard Enquiries.
Particulars
Seller:
Buyer:
Property:
Transaction:
Seller's solicitors:
Buyer's solicitors:
Date:
Notes
1. This document is designed for use with pre-contract enquiries in CPSE.1 and deals with title matters and arrangements for exchange as between solicitors.
2. It is assumed that:
  • contracts are not yet exchanged and that information requested and given in this document will be subject to contract;
  • the contract will incorporate the Standard Commercial Property Conditions (Second Edition) (SCPC); and
  • title is to be deduced and investigated before exchange and no requisitions can be raised after exchange.
3. For the purposes of any provision in the contract that defines or restricts the category of Seller's representations on which the Buyer is entitled to rely, the information supplied by the Seller or the Seller's solicitors in response to this document or in response to any further points as contemplated in note 4, is to be treated in the same way as the written replies to pre-contract enquiries.
4. Any issues arising from investigation of a particular title or the draft contract must be the subject of further specific enquiry.
Interpretation
The section on Interpretation in CPSE.1 is incorporated in this document save that "we" refers to the Buyer's solicitors and "you" refers to the Seller's solicitors and the following interpretation also applies:
  • Lease: means the lease proposed to be granted by the Seller to the Buyer or, as the case may be, the lease under which the Property is held and which is to be assigned by the Seller to the Buyer.
  • Tenancy Documents: refers to the Lease (or, where the Transaction is the sale of a property subject to tenancies, the instrument creating each tenancy), and to any of the following that relate to it: charges, mortgages, surrenders, variations, side letters, undertakings, applications, consents, memoranda, registrations, notices, rent deposit deeds, orders, guarantees, concessions, franchise agreements, counsel's opinions and arbitrators' or experts' decisions.
Requirements
1.Title and contract: all transactions
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Title and contract: all transactions

Inspection of the title documents may reveal matters which need to be the subject of specific enquiries. In particular, in registered land, consider those matters (such as overriding interests) as to which the register is not conclusive, but check first that they are not covered by enquiries in the other CPSE documents that have been submitted.

Requirement 1.2

Any document submitted to the Land Registry will be available for public inspection and copying (section 66, LRA 2002). It is possible to apply to designate a document an exempt information document if it contains prejudicial information (Rule 131, LRR 2003).
"Prejudicial information" is defined as:
  • Information that relates to an individual applicant which if disclosed to other persons would, or would be likely to, cause substantial unwarranted damage or substantial unwarranted distress to the applicant or another.
  • Information that if disclosed to other persons would, or would be likely to, prejudice the commercial interests of the applicant.
Once a document has been exempted, official copies will generally only be issued for the edited version (or composite edited version). It may not be clear from the register whether a document has been designated an exempt information document as the Land Registry's policy will be not to make a specific entry on the register stating this. However, the official copy of the designated document will be recognisable as an exempt information document by the form of the certificate endorsed upon it.
1.1If not already supplied, please send us:
(a)a draft contract;
(b)complete evidence of title to the Property, including, in the case of registered title, a copy of the title plan, official copies of the entries in the register and of all documents referred to, and, in the case of unregistered title, a marked abstract or an epitome of title with photocopy documents; and
(c)copies of any relevant statutory declarations, powers of attorney and defective title indemnity insurance policies.
1.2Has any document relating to the Property been the subject of an application for designation as an Exempt Information Document under Rule 131 of the Land Registration Rules 2003, whether by you or, to your knowledge, by anyone else?
2.Title: subject to tenancies
2.1Except to the extent already supplied, please provide copies of all Tenancy Documents together with a schedule of them.
2.2Are there any informal arrangements with any of the tenants that are not disclosed by the Tenancy Documents?
3.Title: grant of a new lease
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Title: grant of a new lease

Requirement 3.2(c)

Strictly an undertenant should ask for deduction of all superior titles and the freehold, in particular to ensure that any consents were granted by the superior landlords for the time being. With short leases (say, less than 5 years) this is rarely done in practice, although you will still want to see the superior leases themselves.
Note, however, that eventually it will be necessary to register leases as short as 3 years (and all discontinuous leases plus leases granted more than 3 months before they take effect in possession) — Land Registration Act 2002. When that happens, tenants will want to obtain title absolute and full deduction of all unregistered superior titles will be necessary for that purpose.
3.1Where the Transaction is the grant of a new Lease, please:
(a)deduce your title to grant the Lease; and
(b)state whether the Lease will be a headlease or an underlease.
3.2If the Lease is to be an underlease, please:
(a)supply copies of each superior lease;
(b)give the names of the current parties; and
(c)deduce title to each superior lease and the freehold.
4.Title: assignment of a lease
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Title: assignment of a lease

Requirement 4.1

The Buyer needs full information about the Lease, any superior leases out of which the Lease has been granted and any freehold matters that may affect the Lease (such as restrictive covenants). If the Lease is registered, the Buyer will be able to obtain some title information from the Land Registry but any information that the Seller can provide will speed up the information-gathering process.

Requirement 4.2

Under the Land Registration Act 1925 leases for 21 years or less were not registrable and therefore title to such leases may not have been deduced when they were granted. Following the implementation of the Land Registration Act 2002 on 13 October 2003, the assignment of a lease which has more than seven years left to run will be registrable and, in order to obtain title absolute, the assignee will want the landlord's title deduced to it. Where there is a licence to assign, the Buyer may well wish to amend it to put the landlord under an obligation to deduce its title.
Requirement 4.2(b)
The Buyer should provide a form AN1, completed as far as possible, to be forwarded to the landlord to get consent for registration of an agreed notice of the Lease. Alternatively, an appropriate consent letter or even a clause in the licence to assign would be acceptable (but remember to forward them to the Land Registry with the application to register the Lease).
Requirement 4.2(c)
Many leases which were not registrable under the pre-Land Registration Act 2002 regime (see note above) will have plans which do not meet Land Registry requirements. Rather than vary the Lease to insert a new plan (which might give rise to an inadvertent surrender and regrant), the Buyer and the landlord might agree to attach a plan to the licence to assign to be used purely for the purpose of the Buyer's application to the Land Registry.

Requirement 4.3

See note to requirement Drafting note, Requirement 3.2(c).

Requirement 4.4

If the Lease was granted on or after 1 January 1996, the new privity regime introduced by the Landlord and Tenant (Covenants) Act 1995 will apply unless the Lease was granted pursuant to an agreement for lease, an option or court order dated before 1 January 1996. If the Landlord and Tenant (Covenants) Act 1995 does apply, this has important implications for the liabilities of the parties under the lease. If the Lease was granted under an agreement, option or court order dated before 1 January 1996, the Seller will need to supply a copy of the agreement, option or court order.
4.1Please:
(a)provide copies of all Tenancy Documents together with a schedule of them; and
(b)state whether the Lease is a headlease or an underlease.
4.2Where the Lease will become subject to first registration following the assignment, please:
(a)deduce the landlord's title to grant the Lease;
(b)provide the written consent of the landlord on form AN1 to the registration of an agreed notice relating to the Lease following assignment; and
(c)if the Lease plan does not meet Land Registry requirements, provide a plan of the Property that does so and that has been agreed by the landlord.
4.3Where the Lease is an underlease, please:
(a)supply copies of each superior lease;
(b)give the names of the current parties; and
(c)deduce title to each superior lease and the freehold.
4.4If the Lease is dated on or after 1 January, 1996, please confirm that it was not granted pursuant to an agreement, an option or a court order made before that date.
5.Transfer
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Transfer

Land Registry forms can be downloaded directly from the Land Registry website, obtained from a proprietary forms package or developed in-house, provided rules 210 and 211 of the Land Registration Rules 2003 are complied with.
Where the Transaction is the sale of a freehold or the assignment of a Lease which is required to be registered at the Land Registry and the contract stipulates that the Seller is to prepare the form of transfer, please:
(a)confirm that the form proposed has Land Registry approval; and
(b)supply the Crown Copyright number allocated by the Land Registry, if it does not appear on the form of transfer.
6.Charges and incumbrances
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Charges and incumbrances

Requirement 6.3

This anticipates SCPC 8.8.1 and SCPC 1.1.3.

Requirement 6.4

Even if the answer is yes, the Buyer will also need a contract clause to confirm the position as, under SCPC 1.1.3, the Seller can be ready, willing and able to complete (and so could serve a notice to complete) even without holding a discharge. If the answer is no, the Buyer needs to consider the acceptability of undertakings.
In Patel v Daybells [2001] EWCA Civ 1229, the Court of Appeal ruled that the acceptance of a solicitor's undertaking for a DS1 will not normally be negligent. The Court of Appeal left open the possibility that it could be negligent in "exceptional circumstances". These were not specified. The expert evidence in the case (set out in the judgment, but not expressly endorsed by the court) was that it would not be normal or advisable (and therefore might be negligent) to rely on an undertaking:
  • Where the mortgagee was not a member of the Council of Mortgage Lenders (list of members on the CML's web site); or
  • Where the amount required to redeem the seller's mortgage exceeded the minimum level of solicitors' indemnity insurance.
The court did state that the fact that the seller's solicitor in the case was a sole practitioner was not relevant to the question of the acceptability of an undertaking.
If a DS1 (or DS3 on a sale of part) will not be available on completion and the Buyer's solicitor considers that the circumstances of the transaction might be regarded as exceptional (so that accepting an undertaking from the Seller's solicitor might be negligent), the Buyer's solicitor should consider:
  • Arranging to send that part of the purchase price required to discharge the mortgage direct to the lender;
  • Asking to see confirmation from the lender that the Seller's solicitor has been appointed the lender's agent for the receipt of the redemption money (confirmation from the Seller's solicitor alone is not sufficient despite provisions for this in the Law Society's Code for Completion by Post);
  • Where the amount of the mortgage debt exceeds the minimum indemnity insurance, only accepting an undertaking for the DS1 (or DS3) coupled with a warranty from the Seller's solicitor that its insurance cover exceeds the amount required to redeem the mortgage; or
  • Refusing to accept an undertaking from the Seller's solicitor. There is no obligation to accept an undertaking in place of performance of the obligation. However, if that is the Buyer's solicitor's position, a condition to that effect will be necessary in the contract.
Before the Buyer's solicitor accepts an undertaking where it would not be normal practice to do so, it is essential to explain the risks to the Buyer and get clear instructions that the Buyer is willing to accept them.
Even where the lender is separately represented, the Buyer's solicitor should consider whether there are any exceptional circumstances making it unwise (or potentially negligent) to accept an undertaking (at least without evidence of the lender's solicitor's authority to accept the redemption money).
The use of EDs and e-DS1s is becoming more popular, although at present only in the residential field. As its name implies, no paper DS1 is produced and the Buyer's solicitor has to rely on an undertaking from the Seller's solicitor. In this situation acceptance of the Seller's solicitor's undertaking is inevitable and in exceptional cases the Buyer's solicitor will have to take such additional steps as are available (e.g. split payments, evidence of authority, evidence of sufficient insurance cover).
6.1Please supply a list of all mortgages and other financial charges affecting the Property (the Charges).
6.2Please confirm that all the Charges are to be discharged on completion.
6.3Will the purchase money be sufficient to discharge all the Charges?
6.4Will all appropriate receipted documents, discharges, releases and consents be available on completion in respect of the Charges? If not, please supply drafts of any undertakings proposed in respect of later handovers and authorities from mortgagees.
6.5Is there any unpaid seller's lien or other lien affecting the Property or the documents of title? If so, please confirm that they will have been removed by completion.
7.Consents and notices
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Consents and notices

Requirement 7.2

To avoid delays, the Buyer will want to know what has been done to obtain the consents necessary to enable the Transaction to proceed. This includes consents needed to authorise the Buyer's proposed use of the Property following completion of the Transaction. If the Seller knows what information the landlord and/or any superior landlord will require, it should advise the Buyer in the reply to this requirement.

Requirement 7.2(b) and (c)

The need for a consent for change of use or alterations may be referred to in heads of terms or may also become apparent from seeing the Lease or the replies to another CPSE document.
7.1Please state the name, address and capacity of any persons:
(a)whose consent to dealing is required in order for the Transaction to proceed (each a Consent); and
(b)to whom notice of dealing must be given on completion of the Transaction.
7.2Where the Transaction is the grant of a new Lease or the assignment of a Lease, what action has been taken to obtain any Consents which are required:
(a)for the grant or, as the case may be, assignment of the Lease;
(b)for the proposed use of the Property (if different from the current use); and
(c)for the alterations (if any) which the Buyer wishes to make to the Property?
8.Payment of deposit
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Payment of deposit

Requirement 8.1

Note that SCPC 2.2.2 provides that the deposit will normally be held by the Seller's solicitor as stakeholder, so the VAT invoice can only be needed if the SCPC are amended (which they may be, e.g. on an auction sale). Where VAT is payable at exchange on the deposit, the Buyer will need a VAT invoice. Although this is required under the Value Added Tax Act 1994, the Buyer may want to include an express obligation in the contract to draw this to the attention of the Seller and to ensure that the invoice is handed over at exchange. In that case, it may be sensible to require a draft invoice to be prepared so that the details can be checked before exchange.

Requirement 8.2

SCPC 2.2.2 also states that the deposit will be paid by direct credit, which is defined in SCPC 1.1.1(g) to mean a direct transfer of cleared funds to an account nominated by the seller's conveyancer and maintained at a clearing bank.
8.1Where the deposit is to be held as agent and VAT will be payable, please confirm that a VAT invoice for the deposit will be handed over on exchange of contracts.
8.2Please supply the name and address of your bank and its sort code, and the title and number of your client account.
9.Documents to be handed over or retained
Please supply a list of all title documents to be handed over on completion, and
(a)indicate which are originals and which are certified or examined copies;
(b)explain why the originals of any relevant documents will be retained and by whom; and
(c)state which original documents will be the subject of a statutory acknowledgment for production and undertaking for safe custody, and who will give it.
10.Details of conveyancers
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Details of conveyancers

Land Registry application forms AP1, DS2 and FR1 require the applicant's conveyancer to identify the conveyancers acting for all other parties in most common transactions.
Requirement 10 is limited to the Seller's lender, as that is the most common party involved whose representation the Buyer's solicitor will not know. Where there are other parties to the transaction who may be separately represented (or unrepresented), the Buyer's solicitor will have to make a supplementary enquiry.
If the Seller's lender is not represented by a conveyancer, the Buyer should provide in the contract to be given the necessary evidence of identity. For more information about the new requirements, see LR Practice Guide 67 - Evidence of identity - conveyancers.
Please provide the name, address and reference of the conveyancer acting for the Seller's lender.